Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2014 Earnings Presentation
54 slides from Pinnacle Financial Partners's earnings presentation, Jan 21, 2015
Slide 1: Fourth Quarter 2014 Investor Call
Fourth Quarter 2014 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 21, 2015
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward-looking statements Certain of the statements in this presentation may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expec
Slide 3: 4Q14 Summary Results
4Q14 Summary Results Strong loan growth. PNFP exceeded its aggressive 3-year loan growth target Previously Reported Growth 2012-2014 Current Quarter Growth Anticipated Net Loan Growth 3-year Target 11.7% CAGR 3-year Actual (1/1/2012- 12/31/2014) $1.30 Billion 3-year Target 11.5% CAGR $1.27 Billion (
Slide 4: 4Q14 Summary Results
4Q14 Summary Results PNFP’s 4Q14 profitability is already approaching elevated 2015-2016 targets Net Interest Margin Noninterest Income/ Average Assets (1) ROAA 3.95% 1.05% 1.50% 3.90% 1.00% 0.97% 0.97% 3.90% 0.94% 0.95% 0.92% 3.85% 0.89% 0.89% 0.89% 1.40% 0.90% 0.87% 3.80% 3.79% 0.86% 3.78% 0.85% 3
Slide 5: 4Q14 Summary Results
4Q14 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Total Revenues (1) FD EPS ROTCE Earnings Growth $0.53 13.52% (millions) 12.79% $64,697 Up 12.6% yr/yr Up 20.5% yr/yr $0.44 10.83% $57,456 $0.34 $53,363 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4Q12 1
Slide 6: Net Interest Income
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income rises primarily due to volume growth in 4Q14 $50 $50.3 $49.5 $48 $47.2 $46 Net Interest Income $45.9 $45.0 $44 $44.6 $43.6 (millions) $42 $42.8 $42.2 $40.9 $40 $40.2 $39.5 $39.3 $38 $38.4 $37.8 $36 $36.0 $34 6
Slide 7: Average Loans
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew 11.4% compared to 4Q13; yields were stable 6.00% $4,400 $4,436 $4,358 $4,200 5.50% $4,251 $4,130 $4,000 Average Loans Loan Yields 5.00% $3,981 4.88% $3,932 $3,800 (millions) $3,845 $3,600 4.50% $3,682 $3,580 4.34% $3,489 $3,400
Slide 8: Avg. Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of deposits continued to decrease $4,800 1.20% $4,700 1.10% $4,758 1.01% $4,600 $4,655 1.00% $4,500 0.90% $4,519 $4,509 $4,400 0.80% $4,408 $4,300 Deposit Costs Avg. Deposits $4,200 0.70% (millions) $4,199 (%
Slide 9: Record fee revenues in 4Q14
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produces record fee revenues in 4Q14 4Q14 3Q14 2Q14 1Q14 4Q13 Service charges $3,038 $2,913 $2,966 $2,791 $2,739 Investment services 2,737 2,353 2,164 2,128 2,394 Insurance commissions 1,046 1,037 1,145 1,385 1,015 Gai
Slide 10: Efficiency is at an all time best
Loan, Deposit and Fee Growth Yield Operating Leverage Efficiency is at an all time best for PNFP 4Q14 3Q14 2Q14 1Q14 4Q13 Salaries and benefits $23,075 $21,722 $21,772 $21,750 $21,494 Equipment and occupancy 5,984 6,477 5,917 5,709 5,543 Other real estate owned (630) 417 226 651 302 Marketing and bu
Slide 11: Balance Sheet Interest Rate Sensitivity
Balance Sheet Interest Rate Sensitivity PNFP has transitioned away from liability sensitivity Structural Positives – Promoting Asset Sensitivity 1. Avg. non-interest bearing DDAs to total avg. deposits ratio stands at 28.9%. 2. Securities portfolio has a 2.8% effective duration and represents only 1
Slide 12: Floors on loans repositioned
Balance Sheet Interest Rate Sensitivity Floors on loans provided meaningful earnings during low rate environment but resulted in a liability sensitive balance sheet that has now been repositioned $1,400 6.00% Est. Floor Volumes $1,200 4.50% 1.33% of 0.96% 0.93% 0.84% 0.73% $850mm to Loan Volumes ($
Slide 13: Rate shock analysis
Balance Sheet Interest Rate Sensitivity Rate shock analysis shows position modest impact to earnings for various rate scenarios Traditional IRR Shock Analysis 5.00% • Modeling would indicate becoming 4.00% more asset sensitive in 2014 with a 3.00% 100 or 200 bp rate scenario increase. 2.00% Up 200 b
Slide 14: Balance sheet becoming asset sensitive
Balance Sheet Interest Rate Sensitivity Further evidence that balance sheet is becoming asset sensitive Day 1 Rate Change Analysis $2,000 Over the course of 2014, we’ve Millions of dollars $1,750 experienced a decrease in the gap $1,500 between day 1 rate changes from $1,250 approx. $500 mm to $200
Slide 15: Top quartile performance vs peers
Future Outlook PNFP has targeted and delivered top quartile performance PNFP's Percent Rank vs. Peer Group 0% 25% 50% 75% 100% 83rd ROATA percentile Profitability ROATE Efficiency Ratio NPAs/ Assets Asset Quality Reserves/ Loans Note: Calculated as of September 30, 2014. Peer group listed on slide 4
Slide 16: Top quartile shareholder returns
Future Outlook Top quartile execution has resulted in top quartile shareholder returns Total Shareholder Return - 1 yr. Total Shareholder Return - 3 yr. Total Shareholder Return - 5 yr. 200.0% 200.0% 200.0% 83rd percentile 150.0% 150.0% 150.0% 95 th percentile 100.0% 100.0% 100.0% 50.0% 50.0% 50.0%
Slide 17: Summary and Future Outlook
Summary and Future Outlook 2014 Goals & Objectives 2015 Goals and Objectives 5-Year Horizon Double digit EPS growth – $2 FDEPS Dogged execution that produces • Expand CRE asset class Budget in 2014 and sustains increased results • Expand to Tennessee’s other urban markets Achieve 3-year loan growth
Slide 18: Q&A – Fourth Quarter 2014 Investor Call
Q&A – Fourth Quarter 2014 Investor Call 18
Slide 19: Supplemental Information
Supplemental Information Fourth Quarter 2014 Investor Call 19
Slide 20: Supplemental Information
Supplemental Information Chart • Balance Sheet 21 • Asset Quality 33 • Income Statement 38 • Pinnacle Financial Partners profile 41 • Economic and Market Conditions 46 20
Slide 21: Balance Sheet
Supplemental Information Balance Sheet 21
Slide 22: Loan portfolio is diversified
Balance Sheet Loan portfolio is diversified and managed within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 4Q14 4Q14 3Q14 3Q14 4Q13 4Q13 4Q12 4Q12 C&D and Land $322.5 7.0% $322.1 7.3% $316.2 7.6% $313.6 8.5% Consumer RE 721.2 15.7% 706.8 16.0% 695.6 16.8% 679.9 18.3% CRE – Owner Occ. 764
Slide 23: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 4Q14 4Q14 3Q14 3Q14 4Q13 4Q13 4Q12 4Q12 Residential – Spec $39.8 0.9% $39.3 0.9% $28.2 0.7% $ 17.5 0.5% Residential – Custom 34.4 0.8% 31.5 0.7% 29.3 0.7% 16.6 0.4% Residential – Con
Slide 24: 3-year loan targets achieved
Balance Sheet PNFP achieves 3-year loan targets despite significant payoff headwinds Annual Net Loan Growth Quarterly Net Loan Growth $500 $200 $434 $446 $400 $421 Loan Volumes Loan Volumes ($ millions) ($ millions) $150 $300 $100 $200 $50 $100 $0 $- Quarterly New Loan Originations Quarterly Pay Off
Slide 25: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Wholesale Trade, 3.5% Transportation & Accomodation and Food Warehousing, 7.0% Utilities, 0.1% Services, 3.4% Administrative & Support & Waste Management & Remediation Services, 2.9% Retail Arts, Entertainment & Trade, Recreation, 1.0% 6.2%
Slide 26: Loan growth funded by low cost deposits
Balance Sheet Loan growth is primarily funded by growth in low cost deposits % of Deposits by Type to Total Deposits Avg. Loan & Trans, Savings and MMA Account Growth 800 100.00% 60.0% 700 95.00% 50.0% 600 90.00% 500 85.00% 40.0% 400 80.00% 300 30.0% 75.00% 200 70.00% 100 20.0% 65.00% 0 -100 60.00%
Slide 27: Limited dependence on non-relationship funding
Balance Sheet PNFP maintains limited dependence on non-relationship funding 27
Slide 28: Line commitments up, utilization low
Balance Sheet Line commitments are up 15.0% over 4Q13 but utilization remains low 60% 56.15% $2,500 $1,177 $1,131 55% $1,046 $1,028 $1,024 53.89% $989 $2,000 $926 Total Commitments $941 50% $865 $787 Funded % $815 $808 $779 $747 $685 $715 $1,500 45% (millions) $1,000 40% $1,376 $1,375 $1,349 $1,247
Slide 29: Securities book at minimal level
Balance Sheet The securities book is maintained at a minimal level $1,050 25.00% 20.75% 22.50% $1,000 $1,010 20.00% $973 $950 17.50% $940 Average Securities $900 $924 15.00% $876 $850 12.50% (000’s) 12.99% $800 $819 10.00% 7.50% $782 $750 $768 $767 $760 3.58% 5.00% $749 $746 $739 $732 $700 $720 $714
Slide 30: Investment Portfolio
Investment Portfolio Conservative bond portfolio Portfolio: December 31, 2014 1.4% 22.3% 15.8% Total Investments $771 million Unrealized Gain (Loss) $13.5 million 8.6% QTD Purchases $44.2 million 50.1% QTD Sales $ 0.0 million 1.8% Duration Avg Yield - TE 4Q14 2.8% 2.8% Agency Corporates MBS 3Q14 3.0
Slide 31: Municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 4Q14 4Q13 Weighted Average Life 3.4 years 4.4 years % State Agency Holdings 5.25% 4.95% 24% Tax equivalent yield 4.61% 4.53% 76% FMV as % of Cost 104.9% 104.1% Location # of Issuances Ma
Slide 32: Elevated tangible common available for deployment
Balance Sheet Elevated tangible common is available for deployment 10.00% 14.00% Return on Tangible Common Equity 9.64% 9.00% 9.27% 13.50% Tangible Common Ratio 9.18% 9.52% 9.03% 8.96% 9.31% 8.75% 13.52% 8.00% 13.00% 7.00% 12.50% 12.41% 6.00% 12.00% 5.00% 11.50% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q
Slide 33: Asset Quality
Supplemental Information Asset Quality 33
Slide 34: Past due loans remain very low
Asset Quality Past due loans remain very low Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % 2014 total 2014 total 2013 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans $7,058 0.15% $6,069 0.14% $7,336 0.18% Accruing loans $18,330 0.40% 14,099 0.32% 16,289 0.39% Total pa
Slide 35: NPLs remain very low
Asset Quality NPLs remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs and >90 days Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % of (000’s) 2014 total loans 2014 total loans 2013 total loans Const. and land development $5,173 0.11% $5,475 0.12% $1,069 0.34%
Slide 36: Classified assets remain very low
Asset Quality Classified assets remain very low (in thousands) Balances Balances Balances Dec. 31, 2014 Sept. 30, 2014 Dec. 31, 2013 Classified loans and ORE: - Substandard commercial loans $102,077 $110,389 $91,445 - Doubtful commercial loans - - - - Other impaired loans 5,162 5,660 4,659 - 90 days
Slide 37: Current OREO valuations appear reasonable
Asset Quality Current OREO valuations appear reasonable Average Appraisal Balances Fair value as a % of Age (dollars in thousands) Dec. 31, 2014 book value* in Months ORE categories: Developed lots $275 209.4% 6.85 Undeveloped land 9,240 137.9% 4.85 Other 1,671 124.6% 3.97 Total ORE $11,186 137.7% 4
Slide 38: Income Statement
Supplemental Information Income Statement 38
Slide 39: Mortgage volumes rise
Income Statement Mortgage volumes rise due to growth in “purchase money” transactions 140,000 3.50% 2.95% 120,000 3.00% 100,000 2.50% 80,000 2.00% 1.59% 60,000 1.50% 40,000 1.00% 20,000 0.50% 0 0.00% Purchase Money Refinance Gross fees as a % of loans originated 39 39
Slide 40: Efficiency ratio reflects operating leverage
Income Statement PNFP efficiency ratio reflect excellent operating leverage 4Q14 3Q14 2Q14 1Q14 4Q13 Net interest income $50,313 $49,537 $47,226 $45,908 $44,969 Total non-interest income $14,384 $12,888 $12,598 $12,732 $12,488 Less: Securities (gains) losses - (29) - - - Non-interest income, excludi
Slide 41: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 41
Slide 42: PNFP operates in two great banking markets
PNFP Profile PNFP operates in two great banking markets Headquarters: Nashville, TN Offices: 29 in 8 Middle-TN counties 5 in Knox County Founded: 2000 Avg. daily trading volume **: 116,558 shares Total assets: $ 6.019 Billion (12/31/14) % Institutional ownership: 71.74% (9/30/14) Shareholders’ equit
Slide 43: Extraordinarily experienced management team
PNFP Profile PNFP has an extraordinarily experienced management team Name Title Age Years in Years at Banking Pinnacle Industry M. Terry Turner President and Chief Executive Officer 59 36 14 Robert A. McCabe, Jr. Chairman of the Board 64 38 14 Hugh M. Queener Chief Administrative Officer 59 39 14 Ha
Slide 44: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • Sandy Springs Bancorp, Inc. (SASR) • 1st Source Corporation (SRCE) • SCBT Financial Corp (SCBT) • Brookline Bancorp, Inc. (BRKL) • Sterling Bancorp (STL) • Columbia Banking System, Inc. • TowneBank (
Slide 45: Best-in-market share movement
PNFP Profile PNFP has a track record for “best-in-market” share movement Nashville-Davidson-Rutherford MSA Knoxville MSA Top 10 Holding Market Market Change Top 10 Holding Market Market Change Market Company Share Share in Market Company Share Share in Share 6/30/14 6/30/00 Share Share 6/30/14 6/30/
Slide 46: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 46
Slide 47: Business relocations and expansion remain strong
PNFP operates in advantaged markets Business Relo’s and Expansion Remain Strong Source: Nashville Area Chamber of Commerce 47
Slide 48: National recognition for Tennessee & Nashville
PNFP operates in advantaged markets National Recognition for Tennessee & Nashville Source: Nashville Area Chamber of Commerce 48
Slide 49: Nashville and Knoxville are healthy business markets
PNFP operates in advantaged markets Nashville and Knoxville are healthy business markets TENNESSEE • Tennessee is named “2014 State of the Year” for economic development Business Facilities Magazine • Tennessee ranks No. 1 in foreign investment jobs IBM Institute NASHVILLE Nashville has achieved “it
Slide 50: Nashville's economic drivers healthy and growing
PNFP operates in advantaged markets Nashville’s Economic Drivers Healthy and Growing Source: Nashville Area Chamber of Commerce 50
Slide 51: Nashville cost of living a strategic advantage
PNFP operates in advantaged markets Nashville Cost of Living a Strategic Advantage for Business 51
Slide 52: Rapid job growth leads to real estate absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Nashville Home Sales 4Q2014 3Q2014 4Q2013 % Change Avg. Qtrly. Median Home $211.5 $217.1 $197.9 6.8% Price Quarterly Closings 6,924 7,945 6,017 15.1% Quarter end 7,623 9,924 8,228 (7.4%) Inventory Months of 3.
Slide 53: Nashville commercial vacancy rates
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National Vacancy Rates CRE Vacancy Rates YE YE 2013 YE 2012 YE 2011 YE 2010 YE 2009 YE 2008 YE 2014(**) (**) (**) (**) (**) (***) (***) 2014 (**) Industrial / 7.1% 8.7% 9.1% 10.1% 10.2% 1
Slide 54: Fourth Quarter 2014 Investor Call
Fourth Quarter 2014 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 21, 2015
Pinnacle Financial Partners — Q4 2014 Earnings Presentation on 6ix